How to Negotiate Medical Debt
If you have medical debt, there are ways to negotiate a lower price and recent laws are minimizing the impact medical debt has on your financial health. Two-thirds of medical debts are due to one-time or short-term medical expenses and 41 percent of adults have health care debt ranging from under $500 to over $10,000. Of that amount, 44 percent owe $2,500 or more. On average, people settle for 48 percent of their original medical debt.
Ways to Negotiate Medical Debt
If you have medical debt, know the limits on debt collectors contacting you, avoid scammers, and know how to settle medical debts. While it is effective to negotiate medical bills and medical debt, it can take a toll on you. Be organized, and thorough, and do your research as navigating the system can be long and confusing.
A story from The Atlantic in 2019 reported a woman who owed $50,000 for her heart transplant and negotiated her debt to $4,500, but not without obstacles. It may be worthwhile to work with a debt settlement company to help you with this process, especially if you have multiple medical debts that need settling.
To Avoid Medical Debt:
If you receive a large medical bill know you can negotiate it–and that it can save you hundreds:
- Check for errors
- Contact your provider’s billing department
- Ask your provider for an itemized bill in plain language
- Learn about recent government rules such as the No Suprise Act and Hospital Price Transparency rules that have been put in place to increase price transparency and minimize surprise billing (more info below)
- Additional: You can hire a medical bill advocate to help you negotiate a lower bill on your behalf.
These steps can help you avoid your medical debt from going into collections.
What Happens When a Bill Goes into Collections:
Your debt goes into collections when the original lender, in this case, the healthcare provider, turns to a collection agency when they no longer expect to receive your payment. The lender writes the amount off as a loss–handing the responsibility onto the collection agency which acts as a middleman to retrieve the debt.
A lender typically sells the debt between 30 to 60 days to a collection agency. You will get a call alerting you of this change. Previously, a consumer had 6 months to pay the debt before the collection agency reported it on the consumer’s credit report, however, this has recently changed to 12 months, allowing more time for the debt to be paid.
When a debt goes into collections, this leaves a negative mark on your credit report and can damage your credit score.
The Limitations of Debt Collectors:
Debt collectors will try and contact you often about a debt that you owe. You have the right to ask them to verify that you owe it and that it is yours. Debt collectors may sue you to recover the money, however, when contacting you, they must comply with the Fair Debt Collection Practices Act (FDCPA). This prohibits them from calling you repeatedly with the intent to harass, oppress, or abuse you. They are “presumed” to violate the law if:
- They call more than 7 times within a 7-day period
- They call you within 7 days after already engaging in a telephone conversation with you about the particular debt.
Unfortunately, these rules apply to a “particular debt” which refers to one specific debt in collections. So, if you have more than one debt in collections, they can call you more.
They can also contact you through social media but must follow specific rules. If you believe that a debt collector’s practices are violating your rights, there are actions you can take to enforce your rights.
Settling a Medical Debt
Settling a medical debt is not as expensive as filing for bankruptcy and most importantly, gets rid of your medical debt. Previously, it had a negative impact on your credit score, however, new laws will now remove the negative mark instead of it remaining on file for seven years.
The amount a debt collector will settle for ranges on a case-by-case basis. Oftentimes, a debt collector is more likely to settle if you offer them a “lump sum payment” rather than smaller payments over time.
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How to Settle a Medical Debt
If your debt is open under your state’s statute of limitations, you can start negotiating. This involves a back and forth communication with the collector on what percentage of the debt you need to owe. Below is a breakdown of the steps to negotiate a settlement:
- Send the collector a rate you feel you can pay
- The collector will often respond with a higher rate
- From there, continue to negotiate with them until you both find a rate you are comfortable with
- Once you both agree on a price, you will need to sign an agreement with the collector
- Afterward, you will be responsible for paying the agreed amount on time
- If you do not pay on time, your credit score will go down and you risk being sued
- Additional: You can work with a debt settlement company to help you with this process and get a better deal than if you negotiate alone
Current Changes to Medical Debt and Billing
Within the past year, new rules have been implemented to help relieve the confusion surrounding medical expenses and to relieve the harsh impacts medical debt can have on you and your credit report.
Paid Medical Debt Removed from Credit Report
Beginning July 1, 2022, paid medical debt will no longer be reported on credit reports issued by the top three credit reporting agencies (Equifax, Experian, and TransUnion). If medical debt appears on your credit history because it went to collections but has since been paid off, the negative mark will be removed from your credit report. Until now, paid medical debt would remain on your record for seven years!
Additionally, consumers will have 12 months, rather than only six months, before unpaid bills will be reported on credit reports once it goes to a debt collection agency. Starting July 2023, the credit reporting agencies will not include information for medical bills for $500 or less.
Significance of Removing Paid Medical Debt from Credit Report
This move comes in response to a report conducted by the Consumer Financial Protection Bureau (CFPB) on medical debt in the US. The research found that medical debt is not a reliable indicator of a person’s ability to maintain and keep up with payments like other collections accounts.
The decision to remove paid medical debt from credit reports may improve your credit score. An improved credit score will make it easier to access credit or loans at a more affordable interest rate.
Lastly, having a year before unpaid medical collection debt appears on your credit report gives you more time to address your debt before it is reported and on file.
The No Surprises Act (NSA)
The No Surprises Act (NSA) took effect on January 1, 2022, and aims to reduce surprise medical billing. For medical services received on January 1 and onwards, patients should not receive unexpected bills for emergency services from a health care provider or facility that they did not know was out-of-network (not covered by insurance) until they were billed.
The NSA will also benefit those in medical emergency situations who may be unconscious when receiving treatment.
While this federal law will minimize surprise bills, it is still important to look for billing mistakes as 57 percent of insured Americans have been surprised by a medical bill and were under the impression that their care was covered by their insurance.
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How the NSA affects Uninsured People
If you do not have healthcare insurance, you can still benefit from the NSA. Your health care provider must give you a “good faith” estimate of how much your treatment will cost before you get care. If the billed amount is $400 or more above the estimate, you can dispute the charges through the “patient-provider dispute resolution process”.
This process will call upon an independent third party to review your case and determine an appropriate payment. There is a $25 non-refundable fee to initiate this process but if the third party decides in your favor, this amount will be deducted from the amount you owe your provider.
Hospital Price Transparency
Beginning on January 1, 2021, each hospital in the U.S. is required to provide clear and accessible pricing information online about rates they have to negotiate with insurers for common medical services and items. This rule makes it easier for consumers to compare prices across hospitals and estimate the cost of care in advance.
As of February 2022 however, only 14.3 percent of hospitals fully complied with this rule. The Centers for Medicare and Medicaid Services (CMS) are beginning to enforce the rule and have fined two Georgia hospitals. If you cannot find a hospital’s standard charges online or have questions, you can email CMS or submit a complaint.
Medical Debt Frequently Asked Questions (FAQs)
Many people have some form of medical debt but do not realize how common it is. Below we answer some questions you may have regarding statistics about medical debt.
What sacrifices are people making to pay off medical debt?
To pay off medical debt, many people cut back on spending on basic household items, food, and clothing, in addition to spending their savings. Below is a breakdown of ways people are cutting back on spending to pay off their medical debt from a report published in Kaiser Family Foundation this year:
What are the most common bills that lead to health care debt?
The most common bills that lead to health care debt are lab fees, diagnostic tests, doctor’s visits, emergency care, and dental care. Below is a breakdown of top medical bills that are reported to cause medical debt from a report published by the Kaiser Family Foundation this year:
Medical debt can cause stress and impact your financial health. New laws are attempting to alleviate some of the negative impact paid medical debt has on your credit report and improve pricing transparency among hospitals. Medical debt is negotiable and can take time but is effective.
The top leading causes of medical debt are reported to be lab fees and doctor’s visits. For just $45 per month, Mira can help offset some of the costs as it offers low-cost same-day lab testing and discounts on primary care and urgent care visits. Sign up today to get started!
Erica graduated from Emory University in Atlanta with a BS in environmental science and a minor in English and is on track to graduate with her Master's in Public Health. She is passionate about health equity, women's health, and how the environment impacts public health.